Squatting Tax. (Re)Confirmed Illegality

The squatting tax – Cluj-Napoca Local Council’s most recent invention for crediting the local budget – was abolished by the court in a case finalised in the Cluj Tribunal that reconfirms the illegality of the Cluj-Napoca Local Council’s Decisions no. 48/2010 and no. 284/2010.

In fact, the Cluj-Napoca Local Council’s Decision no. 48/2010 implemented the regime of compensation for squatting houses and other premises with a different destination, property of Cluj-Napoca, and established the squatting tax. The compensation was valued at 2 lei/sq m/day for houses and 8 lei/sq m/day for premises with a different destination. Subsequently, the Cluj-Napoca Local Council’s Decision no. 284/2010 additionally implemented delayed payment penalties of 0.5% per day for the above-mentioned damages.

The Cluj-Napoca Local Council’s Decision no. 48/2010 that established this squatting tax was annulled by civil judgment no. 4508/20.06.2014 of the Cluj Tribunal and final judgment no. 1701/16.02.2015 of the CLuj Court of Appeal. There are many arguments supporting the illegality of the local council’s decision:

– Following the in-depth analysing of article 36 paragraph (2) of Law no. 215/2001, republished, we are stating that the local legislator did not have the legal competence to regulate aspects concerning civil legal relations. As article 36 paragraphs (1) and (2) of Law no. 215/2001 claims, the Local Council has the authority to regulate issues of local public interest as a public authority and not as a private individual whether concerning the administration of the public property of the administrative unit or the administration of its private property. Consequently, being in the presence of a decision enacted by violating the public order rules regarding the legal competence, we bear in mind that the first requirement for validity of any administrative act is not met (for details on the matter, please consult: O. Podaru, Drept administrativ, vol. I, Actul administrativ (I). Repere pentru o teorie altfel, Ed. Hamangiu – Sfera Juridică, Bucharest, 2010, p. 81 and the following).

– Cluj-Napoca Local Council’s Decision no. 48/2010 was actually referring the compensation for the damage caused by one’s own actions, regulated in civil law as a type of delictual liability (the decision was enacted under the former Civil Code). Therefore, this decision was already conflicted with Law no. 297/2009 regarding the Civil Code as of the 1st of October 2011. Thereby, article 1386 paragraph (1) of the New Civil Code is stating that whenever compensation is in order subsequently to meeting all the requirements for the civil delictual liability, the compensation is settled by the parties’ agreement or by court. As it can be noticed, however, by enforcing the Cluj-Napoca Local Council’s Decision no. 48/2010, the local council violated the principle of the parties’ equality in civil legal relationships, as well as the principle of the separation of powers, using its public authority to unilaterally determine the amount of the compensation.

– We equally notice that the Cluj-Napoca Local Council’s Decision no. 48/2010 established the amount for compensation (2 lei/sq m/day for houses and 8 lei/sq m/day for premises with a different destination) in an abusive matter, the amount of the “compensation” being clearly disproportionate with regard to the actual prejudice suffered that hypothetically and strictly theoretically would consist in payment for the unpaid rent and the additional interest rates. The prejudice is an element to be evaluated in concreto, referring to factual elements as shown in article 1381 paragraph (2) of the New Civil Code (“The right to compensation is effective since the causing of the prejudice”), and this cannot be previously and definitively quantified without the other party being granted the possibility to defend itself and without granting the court the possibility to find it equitable [we are reffering to article 1386 paragraph (4) of the Civil Code that states the obligation of adapting the amount of the compensation concerning the actually suffered prejudice]. To give a simple example, we notice that in Cluj-Napoca, the squatting tax of a premise that is not a home, but has a different destination is of about 240 lei/sq m/month, so more than 50 euros/sq m/month, given that the rent for newly built offices does not usually go over 15 euros/sq m/month. This supports the fact that the city decided to gorge itself by applying the suggested compensation mechanism and to probably fill the holes of the local budget by violating the law.

– Finally, for scenarios such as squatting public property goods, the city cound have made use of an action for eviction, doubled by the possibility of claiming compensation from the perpetrator.

When implementing the squatting tax, you cannot stop for the simple reason that the court has definitively annulled your decision. This was the city council and the mayor’s theory when drawing up the following strategy: even if the decision was annulled by the court, the tax can still be collected alongside delayed payment penalties for the period of time before the annulment.

Therefore, the squatting tax was still being enforced through some spreadsheets and damages forms, and some taxpayers were notified by judicial executors to pay exorbitant amounts. For instance, our natural person client the lawyers’ civil partnership of Costaș, Negru & Asociații represented was requested to pay approximately 300.000 lei plus penalties for allegedly squatted areas (although, in fact, they were small areas of land in the property of the city left in disarray by the local authority for many years). Following our client’s refusal to pay, the squatted tax was requested in a reversed contentious, in which the claimant was the city.

The civil judgment no. 5424/8.03.2016 of Judecătoria Cluj-Napoca granted the exception of the administrative act’s illegality, excluded the act from the trial and rejected the city’s action for compensation. This legal decision was mentained later, when the Cluj Tribunal rejected the city’s appeal on the 24th of October 2016.

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